Myelodysplastic syndromes (MDS) are heterogeneous hematopoietic stem cell (HSC) disorders characterized by bone marrow (BM) dysplasia and peripheral cytopenias. Therapeutic approaches to improve cytopenias and thus address the major source of morbidity and mortality in MDS rely on erythropoietin stimulating agents (ESA) and DNA-demethylating agents (DMA). These strategies induce differentiation and improve cytopenias in a fraction of patients but their responses are short lived. Retinoids play important roles in differentiation of normal and malignant hematopoietic cells. Retinoids can cooperate with ESA and epigenetic agents in a subset of MDS patients but they have limited clinical benefit either as single agents or in aforementioned combinations. Bone marrow mesenchymal stroma cells (MSCs) expresses CYP26, a retinoic acid inactivating enzyme and controls retinoid homeostasis in the stem cell niche to maintain steady state hematopoiesis. Malignant cells may hijack control of stromal CYP26 activity to create permissive microenvironments. To this end, we showed that malignant plasma cells secrete Sonic Hedgehog (SHH) to induce stromal CYP26 expression and thus create retinoid low niches and drug resistance in multiple myeloma (MM). Hedgehog (HH) signaling has also been implicated in the pathogenesis of MDS. For instance, mesenchymal stroma isolated from BM of patients with MDS has dysregulated HH pathway. Treatment with DMA restores balance in stromal HH activity and thus contributes to reduced survival of MDS cells. In addition, our preliminary data show that MDS cells secrete HH ligands and thus, have the potential to alter CYP26 expression in their BM microenvironment. The overarching hypothesis of this proposal is that abnormal stromal CYP26 leading to retinoid low niches in the BM contributes to impaired differentiation and cytopenias seen in MDS as well as to the lack of clinical benefit of pharmacological retinoids in this disease. The K08 award that provides the eligibility for this application is design to study the role of stromal CYP26 in maintenance of normal HSC in vivo. Here, we propose to elucidate the mechanisms that control stromal CYP26 expression downstream of Sonic Hedgehog and their impact on MDS pathophysiology and response to treatment.